5 minute read

Format of this Article:

  1. Credentials and extra knowledge
  2. Knowledge of various industries
  3. Potential to grow with you
  4. Website that is useful
  5. Look at social media
  6. Proximity
  7. The person working on your project
  8. Fee structure
  9. Extra services
  10. Value added services

Blue circle with 92 percent of it visible. The number 92 is in the center in blue

The question of choosing a CPA for a small business can seem daunting until you consider the following scenario. It seems that your business has grown quite a bit over the last several years. You’ve been consistently hiring more employees each month. Your vendor list has grown from a mere 7 suppliers to over 70. The receivables recently topped $100,000 at any given point in time. The five phone lines you started with have blossomed into a network that keeps growing. All the while you have been using the same bookkeeping and payroll staff. Does it help that your lead accounting department head only has an MBA? And you never found a competent outside CPA because you’ve been too busy.

Sound Familiar? Too often companies grow monetarily, but lag in growing their staff to face the changes that are happening daily. Even when the staff grows with changes, are they independent enough to make the hard choices? This situation isn’t unusual, nor is it inherently a bad situation. Keep your company staff (family) intact, but start the search for a competent adviser, your new CPA, now. For an overview of our services: CLICK HERE.

Here’s the deal

Over the course of this article we will be discussing items that need to be considered when finding or replacing a CPA. Remember while reading this to keep an open mind to what your needs are. You should not have to conform to the CPA firm processes, they should conform to you. The adviser you choose should be able to morph your processes and provide ideas and methods to become more profitable. As well, they should be able to help you grow, save money, make money, plan for the future, etc. The list is endless, so choose a forward thinker that thrives on problem solving. This problem-solving nature will take your company to the next level and beyond. So now we must decide how to choose a CPA for a small business.

Do they have added credentials, and advanced degrees? (beyond CPA that show commitment to learn)

Alphabet soup at the end of one’s name is meaningless unless the letters help your business. Half my time lately seems to be Googling the series of letter following people’s names. Not that all are irrelevant, but a great deal are far too targeted. Do you need a CFP or a CMA or someone with an MAcc? Do you know what those terms even mean? If you don’t, be ready to perform a little google-ectomy on the person you plan to hire. Far too often people get lulled by the many and various three- and four-letter abbreviations after a professional’s name. The reality is that most will not be of interest to you. Always remember, other titles are nice, but they must be preceded by being a Certified Public Accountant. The following are the gold and silver standards for business.

Gold List

Certified Public Accountant (CPA)

Those that hold a CPA license have studied so much accounting that it hurts, and then they studied more. By the time I took the last of the four CPA exams I felt like Roberto Duran at the end of Leonard/Duran II, No Mas! This dedication leaves you with a professional that can go well beyond just number crunching. They can get to the solution of many, if not all, accounting dilemmas you may have. Always look for this designation before all others. A CPA can handle financial statement preparation, review, compilation and audit. CPAs must perform a total of 120 hours of continuing education every three years. Areas of study vary because the CPA has many areas of knowledge. They can perform tax preparation for all entities and basically unravel many of life’s great mysteries.

Certified Fraud Examiner (CFE)

The designation of CFE is a very good add-on to a CPA. These professionals have worked in fraud related capacities and have sat for the required examinations to receive the title. The study guide to become a CFE is quite extensive and covers such areas as finance, investigation, law and prevention/detection. A CPA focuses more on financial, law and regulation, the CFE covers territory on investigation of fraud, law directly related to it and prevention/detection techniques. This is a very nice addition to a CPA because almost every business will suffer from fraud and abuse at some stage of its growth. CFEs have 20 hours per year of continuing education in the areas of finance, law, ethics and fraud prevention/detection.

Silver List

Certified Management Accountant (CMA)

If you need a cost accountant, this is your designation. In order to receive a CMA one must undergo the certification exam which includes two parts It expands upon the area of financial accounting (sometimes called cost accounting) and strategic decision making. Also, there is a requirement for minimum time spent in a designated related field of work. A CMA coupled with a CPA can give you the added punch when it comes to production and manufacture. CMA’s must undergo continuing education in the form of 30 hours per year in the areas determined by the society.

Certified Employee Benefits Specialists (CEBS)

In a society of ever-growing employee perks, you may need this designation on staff, not merely in your CPA. A CEBS handles all your benefits from complementary employee lunches to complex retirement programs. Today’s employment arena includes an ever-evolving array of benefits that employees are demanding. This structure screams out for someone with specialized knowledge to control it. And with many tax changes in the Tax Cuts and Jobs Act of 2017, they can help. 

Bronze list

Enrolled Agent (EA)

This is a designation bestowed upon individuals that have targeted tax preparation as a primary focus. EA’s have taken three exams administered by the IRS through Prometric (which is where most professional testing is done today). The tests are in the areas of personal and business taxation and law/regulation as it pertains to the tax system in the US. I will say this of the IRS EA Exams, they’re tough. EA’s also have to perform 72 hours of continuing education every three years. 

The Rest

I could put quite a few designations in the bronze category. But they get a bit generic and jumbled at this point. The key to remember is this, always know the person you are dealing with. Designations are all well and good, but only if the person keeps up with continuing education and consistently develops their skill set.

Do they have knowledge of various industries?

This is the downfall of many professionals, even CPA’s. If you’re hiring someone to review your financial statements, always make sure they have experience. You don’t want to do hire a CPA that primarily has been performing tax work with little financial statement experience for that task. I recently ran into a CPA that has worked for a private business for the last two decades. After a short conversation I realized that if called upon, he would have a really hard time doing taxes. It’s not that he lacks the ability, it’s just that he has been involved in other types of work for so long. This is not an unusual situation. What do you think would happen if this individual went back to public accounting? There would be a lot of catch up to be done. Is that the person you want? Probably not.

The person you hire doesn’t need to have actually worked in different industries. This person needs to have performed work for various industries. The work could be tax or financial statement work, payroll, accounts receivable or any of the various functions that a business has. This work will give them a different view point of the various business structures and what makes them tick. Different views will give the individual capability to help you save/make money, they will know many ways to do it. Don’t get me wrong, not every new CPA should be shied away from if they do have experience in one form or another. Sometimes the newer person can have view points that are different from the person that has become set in their ways. The point is, always keep an open mind when choosing a CPA for a small business.

Can they handle your company growth?

Many people think that business growth is always a positive thing. But sometimes it can be a detriment, do you know when each applies? If you don’t your CPA should be able to. Things like cash flow, credit worthiness, receivable turn-over, payables timing and many other factors enter into the growth dynamic. Many a business has failed when they tried to expand to fast or too soon. Just as well, many have failed when not taking advantage of growth opportunities. Do you have an adviser that will tell you when your being too ambitious? If you’re unsure about either of these questions, it’s time to find your first, or change your current, CPA. Sorry if the later sounds harsh. The reality is, if you’re being under-serviced by your current CPA, cut the cord and never look back. Your business deserves to thrive just as much as theirs.

A CPA with growth vision is one that can determine the hard choices and give you the straight talk on how to deal with them. No one wants to hear that they should scale back. Scaling back sounds like defeat, yet sometimes not scaling back can spell disaster. Quite often the business owner is too emotionally invested to see the forest for the trees. This is where your CPA comes in handy. Your CPA should act like the throttle of your company, advising you when to speed up and when not to. This isn’t to say that your CPA will stop all problems and downturns, just that they should be able to mitigate them. This ability will save you money, time and the heartbreak of potentially losing your business. Remember, “flying by the seat of your pants” isn’t a business plan, unless your business plan is to fail.

Does their website have useful information?

There are a few website types to consider when choosing a CPA for a small business and here they are:

Generic (haven’t I seen you before, like everywhere?)

When searching for a CPA, or any service, are you only seeing the generic WIX or GoDaddy sanitized sites? This is a good indication that the company you’re looking at is only interested having a website to work like a phonebook ad. They didn’t work either. Chances are you’re looking at someone disinterested in actively growing. They built a website because they had too. This CPA has put the place on auto-pilot as far as gaining the confidence of potential new clients. The downside to this place is that they may have enough clients and not want to expand. Or it could be the old guard of accounting that just wants to float through their existence. In either case, you deserve better than someone that’s quasi-interested in taking on your work.

Abandoned (Mad Max’s website)

I see this in businesses that haven’t pulled it together to even jump to a generic site. This could be due to lack of time, interest or knowledge. The website of the person that is too busy, they look at the site as an after-thought. Disaffection with a website can be a bad sign. These sites need to be navigated carefully to glean information about the company. Broken links and lack of upkeep tend to show a company that is too busy to tend to change. Lack of information shows a company that hasn’t kept up with changing tech and the way sites are researched. The problem with these sites is trying to figure out if the company even wants more business. They really could be signaling a surrender to their current work load and the abandoned state is the result of that.

Too Perfect (Sanitized for your comfort)

I’m not saying that a perfect website is bad, but…yeah, I’m kinda sayin’ that. Here’s the deal with websites, a “ghost town: red lights neglect, but just as well, something too good to be true usually is. The information or content aren’t the issue. But does the site purport to be “the be all and end all” to every problem, malady, ache and pain that you have. You know the sites, they have fifty to hundred pages. Each page has way too much information about everything under the sun. Jack-of-all-trades ring a bell. The bottom line with these sites is this: no one does everything and if they try they will surely fail.

Do you want to be the client they fail on? I sure don’t. The key things to look for on these sites is amount of text and lists of services. First, the amount of text on a page indicates that they are trying to get too much in. They feel that it’s necessary to force as much information at you as possible to keep you on the page. This format screams of desperation and potential clients can see that. Second, if they have a list of services longer than the directory listings for the surname “Smith”, that’s a problem. No one company can do it all, no matter how hard they try to convince you. Stick with a company that does a modicum of services or better yet specializes in three to four areas.

Does their social profile look correct? Look deeper…

The world of social media can be a boon or a bane depending on how well it is managed. Many a company, and job seeker, has lost an opportunity because of a poorly managed social media site. But I’m not talking about the run of the mill problems like posting one unsuitable picture or retweeting something profane you initially thought was funny. I’m getting more into the “what’s wrong with this picture category?”

Anyone can sanitize their site or pay a company to do it. However, the reality of cleansing your real personality can never be removed from your social being. Small things never go away, like an association with a group that’s off-color. Even worse, a series of old comments that people find in your not so distant past are red flags.

Let’s say you went back 5-8 years ago, To a time when most people weren’t paying attention to what they were doing on Facebook (FB). In the 2010-2012 time-frame FB enrollment began to pick up the age group most likely to damage their current reputation. It was a time when people were setting up pages to have fun, some with risqué humor, you might say. They linked all this information to their personal page and never looked back. This group of people eventually decided to bail on the service. Now they find themselves with reams of information that could be used against them in the future. Some decided to sanitize the information, and while many did a good job, the internet remembers all.

Does the CPA need to be local?

This is quite possibly a question that speaks more to the personality of the client than to the CPA. The client and their needs, or perceived needs, will be what drives the answer to this question. It’s not to say that any one personality is better or worse than another. So, if you can recognize which of the following groups you fall into, you’ll have an easier time choosing a CPA for a small business. Below are three personalities that will drive your consideration. To review our virtual CFO offerings: CLICK HERE.

Long distance relationship user friendly

This first personality has grown up on the internet. Skype, GoToMeeting and Smartsheet are embedded in this guys psyche like an installed human app. This is the personality that can work with or without face to face contact. They have been business world breed to operate on the large stage. If you enjoy finding the best person for the job regardless of distance, you can hire a CPA anywhere. This personality will go for the CPA of best fit. They realize that the internet and its host of media products will aid in getting the job done. If this is you, stop reading right now and find that CPA! No, actually it’s better for my SEO if you keep reading, so carry on.

Needs driven with a focus on control

This person is the one that will probably want a CPA down the street. Or even next door if they can find one. Some people enjoy handing the reins to others and letting them excel. Others however prefer to be hands-on. This hands-on style lends itself to desiring a CPA that they can work closely with on most projects. This isn’t a bad thing just a leadership style that requires more attention. When choosing a CPA for a small business they will consider proximity and availability paramount above most other considerations. When searching for a CPA ask questions like, how many staff do you employ? And, If I receive a notice from the IRS, are you available in person? On the phone? And, how quickly can I book an appointment? These are the types of questions the needs driven person should be considering.

Self-starter with no time for small talk

I tend to call this person the “no time for time-bandits” personality. They’ll be looking for a CPA that does much of his business through email and DropBox. The question of physical presence will be less a concern to this person than needs driven, but more than long distance. The reason for this is a self-starter is no frills get the job done. But she also wants to have someone relatively close by when it comes time for certain tasks. Tasks such as delivery of some confidential material and sensitive discussions, to this person, are better done in person. In their case I would suggest a CPA that is within a 2-3-hour radius. This allows the territory to find a good fit. Yet not going too far when those crucial one or two meetings a year come around, is beneficial.

Who will be working on your project?

Many people assume that the CPA they speak with on site is the one that will be handling all their work. The reality though can be quite different. The accounting office of today is generally run by a hierarchy like this:

Ownership (The top partners)

This is the top layer of the company and may or may not be the person you speak with. Like many businesses’, ownership is unusually running the business. They run the function of the business and not so much the actual work product that the business puts out. If you are speaking directly with the top brass, chances are the sellers are far too busy. This isn’t to say that in a small frim you won’t see the owner, you probably will, but when you get to mid-size and large firm, probably not.

Sales Partners

These are the guys that have the function of getting your business at any cost. Just like selling a car or a refrigerator, selling an accounting service is no different. The sales partners usually never see any of the work product, they don’t need to. It’s their job to schmooze the client and get a signature on the engagement letter. The good thing is, even if  not impressed with the salesman, if the accountants are good, you have no worries.

The Workers

The workers in the organization can be everyone from CPA’s down to accounting clerks. They are the staff that performs the work of the company in medium and large firms. The problem with using a sizable company is that you may never know who performed your work. While this may not seem like a big deal to some, consider what could go wrong.

The Problems Ahead

If you engage a company to perform a financial statement review you are asked to sign a management representation letter at the end . This letter assures that you take responsibility for the financial statements. Remember, ultimately you are responsible for the statements. You could have a company that hands off your work to an accounting clerk. If the second review by the CPA is given short shrift, you are still ultimately responsible for those statements. Not a good position to be in.

The Solution

Small firms may not be as well staffed as large ones, but generally they pay more personal attention to their work product. The person that you see at the initial meeting is usually the person performing or reviewing the work. When considering what size company to enlist for your accounting needs, you may want to consider that bigger isn’t always better.

Fee structure?

Hourly? By the engagement? Fees for incidental work? Expenses? Charges for mailing and extra copies? The list of ways that any company, not just CPA firms, can set fees is endless. With so many ways to charge for work product, let’s have a look at some common structures. Work product usually falls into categories. Remember, all firms are different, so ask questions. You may want various services in the future in addition to your current needs.

Hourly

The clock starts, you get charged, the clock stops, you stop getting charged. Pretty simple. The hourly way is good and bad depending on your POV. Hourly in the accounting business is generally used for things like bookkeeping, payroll, data entry and similar small services. This work is usually performed by office staff because it is fairly low tech, not easy, just straightforward repetitious work. I’m not a fan of hourly billing (I think I just heard a slew of lawyers fall out of their chairs). The reason I don’t care for hourly is because I like the idea of being given a price by the job. This is not to say that hourly billing is bad, some companies live by the hourly billing. There are even several dozen apps that thrive on tracking this type of work. In the end, if your happy with the results, go with it.

Be aware that companies are starting to move away from this business model. This is due to the increasing amount of Millennials that do not enjoy hourly billing. This trend is on the uptick and could affect your current or future service provider.

Per engagement

This form of billing is often used with tax preparation and financial statement work (though many tax people are using the per form billing now). Per engagement billing has always been my favored way to work and be charged for that matter. Too many organizations are forcing hourly billing on their clients and my feeling, it is detrimental to the relationship. As well, employees are increasingly finding the hourly tracking cumbersome and contrary to building proper work ethic. Per engagement gives the client a set figure and if the price will increase, they must be notified. Granted a mis-judged engagement could lead to lower profit, but I feel that “you win some, you lose some”, nothing in life is certain. This CPA is becoming a rare breed, so if you find one that bills this way, stick with them.

Per-form Charges

This form of billing has become the new normal with tax preparation. As tax software has evolved, so have the billing practices. In per-form billing the CPA uses a format built into the tax software to charge you. The software has a list of all tax forms and the CPA enters a price per page. When the forms are complete, one click action creates your bill based on forms used. The problem with this type of billing is in the amount of information per page. If you have one stock trade on Schedule D, you may pay the same as someone with twenty. You’re less work but pay the same.

Expenses and extra stuff

Billing for the little extras has also become the norm today. We used to call this type of billing “nickel and diming” the client. Don’t get me wrong, if extra travel, hotel costs or major expenses are involved, I believe that expense billing is in order. However, if your being charged every time the CPA makes a document copy, talks to you on the phone or says “hello” to you at the supermarket, stay away. Some individuals believe they should be compensated for every second of time they spend on a client. This notion is not one to be suffered under. Make sure that this area is detailed extensively if it is put in your engagement letter.

What other services are offered?

When finding a CPA for a small business, you should be forward looking. Perhaps today you only need tax work, but when you head to the bank for a loan on the new expansion, your needs will now change. Many CPA’s specialize in one area, such as tax and nothing else. When the bank asks for reviewed financial statements you may need to look for a different CPA, this is no way to do business. Sometimes the tax CPA will tell you they are capable of financial statement review, but are they? This grey area is one to be explored upfront. Perhaps the CPA has competent financial CPA’s where he hands off review work. This is okay as long as you know this up front.

One-stop Shop?

Services that many businesses will need over time include, bookkeeping, payroll, tax work, financial statements (preparation, compilation, review), cost control, fraud prevention, business planning, etc., etc., etc. As you can see, the list is long so the better you plan, the better your CPA can plan for your future. One company could handle all of these services but be conscious of who you hire to perform different tasks. This will make you cognizant of how your spending your time, money and other resources on the accounting function.

Business Size

Generally speaking for a small to mid-size business you may need two or so different companies to handle your many needs. A proper design is to have a bookkeeping person that handles the day to day accounting. Next you need a payroll company to handle this complex area of accounting. Payroll has a lot of moving parts and you need a well-oiled attentive company for this. Last, the CPA should be able to handle the rest. Though you may need to separate some functions like cost control and fraud investigation as they are more targeted skills.

How can they help you make more money? Or save it?

The phrase “it’s not how much you make, it’s how much you save” is the subject of our last item in this list. If your CPA isn’t constantly and consistently looking for ways that you can save money, it may be time for a change. Your adviser needs to teach you how to stifle the flow out of the money spigot. Every business has a money spigot, it’s called accounts payable. The department isn’t the cause of the increased-out flow of cash through the money spigot. But it’s where the cash exits your establishment. Every department is responsible for slowing the flow from the money spigot, as well as your CPA. In the short form, your CPA should be teaching you and your staff how to save. I’ll give you the least math heavy explanation of what waste costs your business.

Your company runs on a 10% profit margin. Due to waste and inefficiency, your company has $1,000 a month flowing out of the money spigot. If you find a way to save $1,000, it’s like earning an extra $1,000 without doing any work. Alternatively, how much revenue would you have to earn to make $1,000 in profit at a 10% margin? (hint, $1,000/.10) You need to earn an extra $10,000 to recoup that $1,000 your employees are wasting. Think about if it were $10,000 wasted or if your profit margin is only 7%. These are numbers that escalate fast when you don’t have a CPA that helps you bring them under control. Helping you teach the staff good money saving habits is part of the job your CPA should be doing. The handle on the money spigot goes in both directions, which way do you want employees turning it?

The bottom line

We have now come to the end of a long and exhaustive list of ways of finding a CPA for a small business. CPA’s can drive your business to new heights if enlisted to do so. If your CPA has advanced degrees, she may be able to help you in area specific ways never considered. Knowledge of various industries helps, even if not your specific industry by providing varying viewpoints. Your growth may actually coincide with your CPA’s firm growth, this can be a good thing. The new guy on the block isn’t a detriment, it can be a bonus. Background and personality do mean something, so always do your due diligence when checking on your new CPA. Price shopping is not a bad idea unless your only concern is price, you get what you pay for.

Always remember the old axiom, “it’s not how much you earn, it’s how much you save”. These simple words can lead you down the road of fortune. To see our service offerings: CLICK HERE.

Ernest L Tomkiewicz is a New Hampshire and Massachusetts licensed CPA and a US Certified Fraud Examiner. He has worked in various industries including retail, service, construction, manufacture and food service. He has also served on several Not-for-Profit board of directors as President and Treasurer

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